Finance is the general term for money circulation and credit activities and the economic activities associated with them. Finance in a broad sense refers to all economic activities related to the issuance, custody, exchange, settlement and financing of credit money, even including the purchase and sale of gold and silver. Finance refers specifically to the financing of credit money.
The content of finance can be summarized as the issuance and withdrawal of currency, deposit taking and payment, loan issuance and recovery, gold and silver trading, foreign exchange, securities issuance and transfer, insurance, trust, domestic and foreign currency settlement, etc. Institutions engaged in financial activities mainly include banks, trust and investment companies, insurance companies, securities companies, as well as credit cooperatives, finance companies, investment trust companies, financial leasing companies, securities, bullion, foreign exchange, etc.
Finance is an economic category that was formed after the emergence of credit money. It and credit are two different concepts: (1) Finance does not include physical borrowing and lending, but refers to financing with monetary funds (finance in a narrow sense), and in addition to financing through borrowing, funds are also financed through the issuance of shares. (2) Credit refers to the borrowing of all money, and finance (in the narrow sense) refers specifically to the financing of credit money. The reason for creating a new concept in addition to “credit” to specifically refer to credit money is to summarize a new economic phenomenon; the two economic processes, credit and money circulation, are closely intertwined. The most representative financial feature is bank credit, which creates and reduces money. Bank credit is considered to be the core of finance.
Finance is a discipline that is distinct from economics and the study of finance. The traditional field of finance research generally has two directions: the theory of financial market operation at the macro level and the theory of corporate investment at the micro level.
